FIN405 Strayer Long and Short Term Costs of Capital Discussion

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xpunivrf

Mathematics

FIN405

Strayer University

Description

Why might the constant dividend growth model (CDGM) and capital asset pricing model (CAPM) produce different estimates of the cost of equity capital used in the weighted average cost of capital (WACC)? Describe the difference between permanent and temporary working capital. What are some factors an organization considers when it chooses the mix of long- and short-term capital to finance the organization’s activities?

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Running head: LONG- AND SHORT-TERM COSTS OF CAPITAL

Long- and Short-term Costs of Capital
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LONG- AND SHORT-TERM COSTS OF CAPITAL

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Long- and Short-term Costs of Capital
Constant Dividend Growth Model assumes that there is constant perpetuity for the
dividend growth rate in the future. The dividend paid by most of the organizations is based on
the decision by top management and not necessarily on the past dividend payments. The
model also ...


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